iTunes Turns 6 – Much To Celebrate, But Danger Ahead

iTunes celebrates its 6th birthday today.  With an estimated 70% of the worldwide music download market, Steve Jobs & Co. have much to be proud of. A new InStat survey predicts that 25% of the overall worldwide music market for iTunes by 2012. But to maintain its dominant position, iTunes has much work to do and some tricky competitive waters to navigate.

Six month after Amazon began offering DRM free downloads from all four major labels and thousands of indies, the majority of music sold on iTunes still carries Apple’s proprietary DRM that tethers downloads to Apple created products. The labels may or may not be to blame, but its hard to imagine that Jobs could not move the DRM-free forward if he chose to.

As DRM free music spreads to more stores and new services, iTunes will find that it has more than just Amazon to compete with. MySpace Music, Nokia’s Comes With Music, imeem, WE7, SpiralFrog, Rhapsody and Napster, niche players and services not yet imagined each have the potential to whittle away at Itune’s market share.

Then there’s the slow rate of digital music adoption. 85% or more of music is still sold via physical formats. Some consumers are unwilling to give up their home stereos and their autos don’t have compatible docks. So, for many, the CD still feels like a more portable product.  RIAA lawsuits, label embedded copy-protection and Apple’s insistence on its own proprietary DRM have all led to consumer confusion and among younger buyers deep cynicism.

Congratulations iTunes, on your 6th Birthday. But look over your shoulder; there are a bunch of kids chasing you.

POLL: WHAT DO YOU THINK ITUNES’ MARKET SHARE WILL BE BY 2012?  VOTE HERE.